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The New Year is just around the corner so using the most recent
09/30/2010 banking industry data submitted to the FDIC, I have
recently compiled the Quanta Analytics List of U.S. Banks in
Trouble for 2011 and Beyond. But before I explain how you
can obtain this free, no strings attached, no hassle, and no
continuous follow-up list, I believe it is important to explain
several key points in relation to the Quanta Analytics List.

One, although the banking world may still be struggling, the
Quanta Analytics List shows that it is not going to
crumble. Even though there are still a significant number
of banks in trouble, most of the bill has been paid and the worst
of the banking crisis is over. The new Quanta Analytics
List of Troubled Banks for 2011 and Beyond identifies 446 banks
with a total asset base of $219 billion, which is approximately
half the size of the FDIC’s own troubled bank list which is not
made public.

Two, putting the size of the QA troubled bank list into
perspective, it is important to understand that the QA list
represents less than 5.8% of the banks in the banking industry
and that these troubled banks account for less than 1.7% of all
banking assets.

Three, not all banking assets are toxic. The total
estimated losses that Quanta Analytics expects the FDIC to incur
if they had to shutdown all 446 banks on the Quanta Analytics
list (which they will not have to do) would be in the range of
$13 - $20 billion.

Four, the Quanta Analytics List for 2010, which was also less
than half the size of the FDIC’s troubled bank list, contained 52
of the last 53 banks shutdown by the FDIC. Essentially what
I am saying with this point is: the Quanta Analytics list is a
tight list, sorted by the banks most in trouble. And even
though the list may contain a few “weak sisters” that are likely
to survive, it does not stretch its risk criteria to add banks
just to try and protect its record against banks actually shut
down by the FDIC nor does it try to over-dramatize the remaining
bank risk.

Five, not all areas of the country are created equal.
Thirteen states account for 72% of the banks in trouble and 63%
of the banking assets on the QA troubled bank list. These
thirteen states in order of the number of troubled banks counting
downward are: Georgia; Florida; Illinois; Minnesota; Washington;
Michigan; California; Missouri; Colorado; North Carolina;
Wisconsin; South Carolina; and Kansas.

Six, and I repeat myself—but not all areas of the country are
created equal. Fourteen states and the District of Columbia
account for only 2% of the banks and 7% of the banking assets on
the list. These fourteen states in order of least concern
are: Alaska, Maine, New Hampshire, Vermont, West Virginia,
Wyoming (all of which do not have any banks on the QA list), then
Connecticut, Mississippi, South Dakota, Hawaii, Indiana,
Delaware, Massachusetts, and Rhode Island (all of which have one
bank on the list).

Seven, even troubled banks can be segregated into different risk
groups and the Quanta Analytics list does this by segregating
banks into four quadrants by comparing the ratio between
Non-performing Assets (i.e., NPA or the amount of loans in
delinquent status or foreclosure) and Equity. For example,
the worst risk quadrant on the QA list contains 102 banks that
have an NPA to Equity ratio greater than three—not good by the
way.

Eight, as a check point, the values for annualized net income
(which is negative for most of the banks on the list) were
compared to the values for Non-performing assets and they
correlated well. For example, seventy-five percent of
the banks identified as falling in risk quadrant one would burn
out the remaining equity in less than two-years at the current
annualized rate of losses. Four banks on the list already
show negative Equity.

And finally nine, a small sampling of eighteen of the troubled
banks (the worst ten and the eight banks that had more than $1
billion in assets in QA’s risk quadrant one) showed that more
than 15% of deposits sat in accounts with amounts greater than
the FDIC insurance level of $250,000. For this small sample
group of eighteen from the QA list there were more than $2.63
billion out of a total deposit total of $15.0 billion in 3,508
accounts which had account balances greater than $250,000—an
average of $752,000 for this particular group of accounts.

As someone who directed the group of analysts who helped Ginnie
Mae manage and monitor the risk of their mortgage-backed security
portfolio during the Savings & Loan crisis, I cannot help but
admire the work the FDIC has done to effectively begin cleaning
up the banking industry. I only wish that I could say the
same thing for Congress, the Federal Reserve, and the U.S.
Treasury.

The Quanta Analytics List can be used in many different ways, but
the primary reasons for developing it were to: (1) independently
monitor the FDIC; (2) verify the quality of public data; (3)
substantiate and fine tune quantitative theories developed nearly
twenty-years ago during the S&L crisis; and (4) hopefully
protect some of those people that have accounts in troubled banks
that are not fully insured. The Quanta Analytics List can
be obtained through the following email address: quanta.analytics@gmx.com.